Every few months an invitation arrives on my desk to a meet a member of the shadow cabinet at an event organised by the “Conservative City Circle”. These events, held in distinctive City locations such as the Mansion House, are designed to introduce movers and shakers in the Square Mile to David Cameron, George Osborne and other senior Conservatives.
The “cocktail parties”, as they are engagingly described on the group’s website, are a direct descendent of the “prawn cocktail offensive” conducted by Tony Blair and Gordon Brown in the run-up to the 1997 election. The Blair-Brown approach was designed to demonstrate to the world of finance that Labour had changed. Not only had new Labour taken on the trade unions and faced them down, but a new Labour government would recognise the importance of finance to Britain’s economy. The free-market reforms and privatisations of the Thatcher era, which had been so bitterly opposed, would be left intact.
What is curious about the Conservative City Circle’s 1950s-style cocktail parties and working groups is that they are needed at all. Historically, the idea of the Tories having to reach out to business and the City would have been risible. Business flocked to the party’s doors and few self- respecting FTSE 100 companies would have omitted their hefty donations to the Conservative Party or think tanks with Tory connections.
Conservative frontbenchers didn’t need to reach out to the City to be known and trusted, because they were of the City. The old merchant banks, such as N M Rothschild, were hothouses of Conservative talent. Not because they were inherently political, but because a City training in bids and deals, trading, privatisations and the like was considered an excellent education for future politicians. The idea was to establish a career, make enough money if possible and then put those talents to use in the House of Commons and government.
How much things have changed. When Peter Buckley, chairman of the publicly quoted Cayzer family vehicle Caledonian Investments (which owns a big stake in the investment bank Close Brothers), chose earlier this year to attack Labour and support the Tories, he attracted a torrent of criticism from corporate governance mavens.
In a note to shareholders, Buckley wrote: “Shorn of integrity and economic competence, rooster Brown has even less feathers than rooster Blair and lacks the latter’s knack of preening himself.” He backed up his words with the promise of a £75,000 corporate contribution to the Conservatives.
In fact, one of new Labour’s greatest achievements – or betrayals – has been its seduction of business and the City grandees. In the Blair-Brown era, the succession of top business leaders willing to serve as policy advisers was stunning. And it hasn’t stopped under Brown and Darling,
It was no coincidence that the rescue of Halifax Bank of Scotland (HBOS) by Lloyds TSB was partly cooked up a City grandee – Sir Victor Blank, chairman of Lloyds – in a “chance meeting” with the Prime Minister at a reception hosted by Citigroup, one of the world’s largest banks. Nor that the top figures at both banks – Blank and Lord Stevenson, chairman of HBOS – are both regarded as business pals of Labour.
Indeed, the former chief executive of Halifax, Sir James Crosby, is the person Labour is counting on to deliver groundbreaking reforms to Britain’s creaking mortgage market.
The remarkable fact is that the current Tory front bench, which within 18 months could be assuming the reins of political power at a moment of unprecedented economic turbulence, is among the least City-savvy in a generation. This is why it needs to go out and look for financial and business experience through the “City Circle”.
“The problem for the Conservatives is that the front bench is largely made up by a new breed of professional politicians who know very little about anything except PR and politics,” remarks Dr Andrew Hilton, director of the independent think-tank, Centre for the Study of Financial Innovation (CSFI).
Hands-on experience
Hilton is scathing about the current Conservative leadership. “The lack of financial experience is a big lacuna. The route now is straight out of Oxford and Cambridge, into PR or political research and, before you know it, they’ve made it on to the front bench,” he says. Asked to name a prominent Tory with the requisite financial experience, he could only suggest David Gauke, MP for South West Hertfordshire, who worked for a leading City law firm, but hardly registers among the top-ranking Conservatives.
Among the new Tory frontbenchers, David Cameron, the son of a stockbroker, is one of the few who can claim that knowledge of the financial world courses through his veins. His hands-on business experience stems from his short period as communications director of the tele v ision franchise Carlton, now part of ITV.
His time at Carlton stored up troubles for Cameron among the notoriously hard-to-please financial press. The BBC’s influential former business editor Jeff Randall, now an editor-at-large for the Daily Telegraph, is among his sternest critics. “In my experience,” he noted in the paper, “Cameron never gave a straight answer when dissemblance was a plausible alternative.”
The shadow chancellor, George Osborne, also has a “trade” background. The quoted family firm Osborne & Little is a favourite among interior designers for its catholic collection of wallpaper and soft furnishing designs. Osborne is thus familiar with the travails of medium-sized firms in a globalised world and, to his credit, he has surrounded himself with informed thinkers such as Matthew Hancock, formerly of the Bank of England.
When the Northern Rock crisis first broke a year ago, Osborne was quick to embrace the idea of an old-fashioned Bank of England-organised rescue, where City banks would offer a lifeboat to a failing bank. This is precisely what has happened with Alliance & Leicester, Bradford & Bingley and, most recently, HBOS. Osborne was also supportive of Mervyn King’s proposals for a strengthened deposit insurance scheme at a time when Labour has dithered and delayed.
But there is no hiding the fact that, unlike previous Tory shadow and real chancellors, his experience and knowledge of finance is negligible. Oliver Letwin, shadow chancellor under Mich ael Howard, may have lacked political gravitas, but he came with the stamp of N M Rothschild. Ken Clarke was a heavyweight political operator with commercial experience gained as a lawyer, and John Major had climbed through the ranks at Standard Chartered, one of the nation’s most successful banking concerns. Even Norman Lam ont could boast a career at N M Rothschild from 1968 to 1979.
As PM, Margaret Thatcher was surrounded with people with serious City and business experience. Peter Walker was a junior partner in the asset-stripping bank Slater Walker, William Waldegrave was a Dres dner Kleinwort Benson veteran, Michael Heseltine an entrepreneur who founded one of the UK’s most successful private companies, Hay- market Publishing, and so on. Thatcher also had her late husband Denis, a former senior executive of his family business Burmah Oil (since swallowed up by BP), to whisper in her ear.
David Davis, a senior executive at Tate & Lyle, was one of the few business heavyweights in Cameron’s shadow cabinet, but he now adorns the back benches after his decision to seek re-election on an erosion of freedoms platform. The shadow trade secretary Alan Duncan boasts a period as an “oil trader” on his CV. But one would been hard-pressed to judge, from his performance on the BBC’s Question Time a week ago, what his understanding is of the scale of the financial crisis facing Britain.
Among the leading City figures now at Cameron’s elbow is Michael Spencer, the extrovert chief executive of Icap, an electronic broker and City derivatives trading firm which has been suggested as a potential merger partner for the London Stock Exchange. As treasurer for the Tories, Spencer has been in perpetual motion in recent times.
When I visited him at his offices in the months after the credit crunch hit, he was entertaining an exclusive group of high-street bank chairmen whom he was seeking to persuade of the wisdom of supporting Cameron and his team. His success in the City, in one of the most volatile periods of recent times, has won him credibility among his fellow financiers. He is also one of the City’s most accomplished philanthropists, with a particular devotion to Africa. But because of recent personal problems, it is unlikely that he will play a very prominent role at conference.
At a time of unprecedented financial turmoil, almost certainly the greatest banking crisis since the Great Depression, Tory expertise in the increasingly complex and globalised world of finance seems thin on the ground. Vince Cable, the Liberal Democrat economic spokesman, demonstrated throughout the current crisis that it is possible constructively to oppose and come up with credible ideas without talking the economy down. But Cable has hands-on knowledge of business from his period as chief economist of Shell.
The Conservatives’ failure to say anything significant about the current catastrophe is unsurprising, when it falls so far outside the comfort zone of their present front bench.
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